The Supreme Court Gives Employees the “Green Light"to File Disparate Impact Claims Under the ADEA

John M. Russell¹

Prior to the Supreme Court’s decision in Smith v. City of Jackson, Miss., 544 U.S. 228 (2005), there was a split among circuits as to whether disparate impact claims were authorized by the Age Discrimination in Employment Act (ADEA). ²

Smith v. City of Jackson, Miss.
In this case, a group of older police officers filed suit against the City of Jackson asserting age discrimination under the ADEA based on the City’s implementation of a new pay plan. The City had instituted a new pay plan, which granted raises to all police officers, in order to bring the starting salaries of police officers up to the regional average. Under the plan, officers who had less than five years of tenure received proportionately greater raises when compared to their former pay than officers who had more seniority.³

The officers alleged that the City’s plan both deliberately discriminated against them because of their age (“disparate treatment” claim), and “adversely affected” them because of their age (“disparate impact” claim). The Fifth Circuit had affirmed the dismissal of their disparate impact claim based on its decision that disparate impact claims were never available under the ADEA. The Supreme Court did not agree and specifically held that the ADEA does authorize recovery in disparate impact cases.

The ADEA provides that it shall be unlawful for an employer “to limit, segregate, or
classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s age.” See 29 U.S.C. § 623(a)(2). The Supreme Court noted that except for the substitution of the word “age” for the words “race, color, religion, sex, or national origin,” the language of the provision in the ADEA is identical to that found in Title VII. Thus, the Court began its decision based on the premise that when Congress uses the same language in two statutes having similar purposes, it is appropriate to presume that Congress intended the text to have the same meaning in both statutes. Both statutes prohibit actions that “deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s [race or age].”

Relying on the legislative history and language of the ADEA, the Supreme Court found that plaintiffs can allege claims of disparate impact under the ADEA. However, the Court noted that unlike Title VII, the ADEA significantly narrows its coverage by permitting any “otherwise prohibited” action “where the differentiation is based on reasonable factors other than age.” See 29 U.S.C. § 623(f)(1). Thus, the scope of disparate impact under ADEA is narrower than under Title VII. Unlike Title VII, which imposes the business necessity test and asks whether there are other ways for the employer to achieve its goals that do not result in a disparate impact on a protected class, the ADEA uses a “reasonableness” inquiry that does not include such a requirement.

Even though the Court found that disparate impact claims could be brought under the ADEA, it found that the police officers in the Smith case failed to establish a disparate impact claim. To establish a claim of disparate impact, employees must isolate and identify the specific employment practices that are allegedly responsible for observed statistical disparities. The police officers in Smith merely pointed out that the pay plan was relatively less generous to older workers than to younger workers, but failed to identify a specific test, requirement, or practice within the pay plan that had an adverse impact on older workers. In addition, the City based its pay plan on “reasonable” factors other than age—they sought to raise the salaries of junior officers to make them competitive with comparable positions in the market.

[1] John M. Russell is a partner with Lawrence & Russell, LLP, where he devotes his practice to litigating employment disputes and ERISA matters on behalf of employers and self-funded employee welfare benefit plans. He can be reached at johnr@lawrencerussell.com.

² The First, Seventh, Tenth, and Eleventh Circuits held that a disparate impact theory was not cognizable under the ADEA, but the Second, Eighth, and Ninth Circuits held that such a claim was authorized under the ADEA.

³ Since most of the older officers had more than five years of service, their pay raises, on average, represented a smaller percentage of their salary than the younger officers.